GLOSSARY

DEBENTURE

10 May 2016 By PDSNET

This is a form of long-term loan. A company issues debentures, usually at R1000 each, at a fixed percentage return. Debentures are then redeemable at a specified date, but in some cases may be convertible into ordinary shares. Debentures are not part of the equity of the company. They differ from redeemable preference shares in that the interest (or coupon) on them is paid whether the company is profitable or not. Dividends on redeemable "prefs" need not be paid if the company is not profitable. So a debenture is slightly more secure than a convertible debenture. Debentures should be included in the company's debt: equity ratio as debt.

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